Budget management and control

Reviewed date January 2020

 

Budgetary control

Service Providers (SP) working for Oxfordshire County Council (OCC) are required to manage delivery of their work within the budget allocated and be held responsible where this is not achieved. To ensure that all capital projects are contained within the funding available the SP will arrange for an internal procedure to be set up whereby only the SP nominated project manager will be authorised to use the Capital Code.

Construction budget

SP must ensure that schemes are fully designed at time of contract let, as contractor claims or delays due to lack of or inadequate design information can lead to overspends. The SP shall not therefore include excessive construction contingencies or provisional sums. Contingencies and provisional sums shall be recommended by the SP, and costed against identified items in the risk register, and agreed with the client at gateway reviews.

Careful management and change control is required to ensure than the contract sum is not exceeded. The SP must mitigate the need for additional funds within the contract, before discussing with the client the need to overspend.

When construction costs have the potential to exceed the contract sum, the SP must formally issue a notification to the Oxfordshire County Council Corporate Landlord (OCCCL) outlining the cause for the potential overspend and the action being taken to minimise the increase in costs - see report form below.

Where these costs are likely to exceed 5% of the contract sum at the time of contract let, the SP project manager will be required to present to OCCCL Leadership Team to detail:

  • the reason for the overspend
  • the action taken/ to be taken to mitigate the overspend through cost reductions elsewhere
  • the justification for the additional funding required
  • where the notification has not been issued at the time when the overspend has become apparent, justification for any delay in notifying OCCCL
  • effect on project programme

Overall project budget

SP must ensure that they wholly understand the overall project budget, including components managed directly by OCCCL, and take full ownership. They must ensure that the overall project approval for the scheme is robust and deliverable.

Outline project approval

The total project cost to be borne by OCC, including all construction costs, fees, etc.  is to be determined by the SP at the feasibility gateway review and will form the basis for the outline project approval. As a requirement of Oxfordshire County Council Capital Governance, a 10% client contingency must be included within the project approval (outline), and profiled to be spent in the year following project completion. This is to be managed by the SP who will be held responsible for any spend.

Detailed project approval

Once tenders for the construction project have been received a review of the potential costs to the authority of delivering the intended project must be carried out. As a requirement of OCC Capital Governance, the client contingency will be reduced to 5% (subject to risk) and such allowances must be included within the project approval (detailed), and profiled to be spent in the year following project completion. This is to be managed by OCCCL who will be responsible for any spend as part of the county council's overall risk mitigation strategy.

Where this exceeds the funding approved at outline project approval stage the SP will be required to submit a formal report as part of the tender report to detail:

  • the reason for the overspend
  • the action taken to mitigate the overspend through cost reductions elsewhere
  • the consequent justification for the additional funding required.

Accountability

Capital projects which exceed the overall project budget provision allocated within the detailed project approval by more than 5% must be submitted for a revised project approval in order to reallocate funding to cover the overspend.

In these circumstances the SP project manager will be required to present to one of the following:

  • OCCCL Leadership Team (comprising senior property officers)
  • Capital Programme Board (comprising senior directorate officers)
  • Capital Investment Board (comprising senior officers and councillors)

To provide a detailed explanation of:

  • the reason for the overspend
  • the action taken/ to be taken to mitigate the overspend through cost reductions elsewhere
  • the justification for the additional funding required
  • any impact on project programme
  • the lessons learnt to be applied to future work

Budget Management and control Overspend reporting